Market Vista: Q2 2013

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Market Vista Q2-2013 includes data, analysis, and insights on transaction trends, major outsourcing deals, global in-house center market dynamics, trends in offshoring destinations in Latin America, and service provider developments. The report also includes Standard Locations Database, which tracks 23 leading offshore locations (can be upgraded to Advanced Locations Tool)

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Market Vista: Q2 2013 – Preview Deck

April – June 2013

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

Our research offerings for global services

Subscription information


The full report is included in the following subscription(s) – Market Vista In addition to published research, a subscription may include analyst inquiry, data cuts, and other services If you want to learn whether your organization has a subscription agreement or request information on pricing and subscription options, please contact us: – [email protected] – +1-214-451-3110

Market Vista Global services tracking across functions, sourcing models, locations, and service providers – industry tracking reports also available BFSI1 information technology BFSI1 business process Healthcare information technology Information technology Cloud Vista Global sourcing PricePoint Finance & accounting Procurement Human resources Recruitment process Contact center Service provider intelligence Transaction Intelligence





Custom research capabilities  Benchmarking | Pricing, delivery model, skill portfolio  Peer analysis | Scope, sourcing models, locations  Locations | Cost, skills, sustainability, portfolio  Tracking services | Service providers, locations, risk  Other | Market intelligence, service provider capabilities, technologies, contract assessment

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Banking, financial services, and insurance Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907 2

Table of contents

 

Product overview Illustrative contents

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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The increasing complexity of the outsourcing market has amplified the risk exposure for companies
Factors driving increased risk Vendor and model proliferation Multiple service providers and business models Examples of risks Regulatory risk Ensuring compliance with regulatory guidelines in source and destination countries across service providers Business case risk Managing wage inflation without affecting quality of service Performance risk Managing quality of service delivery, attrition, knowledge retention Data security and intellectual property risk Implementing measures to safeguard data and intellectual property

Large span of functions Typically combination of many IT, BPO and some KPO services Increasing scope Significant proportion of operations now in low cost locations Global delivery chain Services often delivered from multiple locations with diverse risk footprint Dynamic economies Most delivery locations are emerging economies going through rapid change

Concentration risk

Business continuity risk Currency risk ….

Most large companies have capabilities in global risk management. However, the level and type of risk exposure that is emerging from the globalization of services is unprecedented
Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907 4

Sourcing leaders are being asked to manage risks associated with global sourcing and support the delivery of transformational results
What are my peers doing?
Are there opportunities to optimize my pricing? What is the real inflation and how does it compare to price increases in my portfolio?

What new service delivery models/ service providers are my peers leveraging?

How can I better manage forex changes?

Are there new govt. incentives that I can avail?

What new risks are my service providers taking on?

Who are the emerging service providers in my areas?

How are the relative costs moving across locations?

Are their any new political or macroeconomic risks I need to be aware of NOW ?

Key decisions that Sourcing managers need to support  Comparison with peers  Location risk management  service provider selection and optimization  Design of new deals  Price benchmarking and contract renewals
Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907 5

Market Vista provides continuously updated facts and analysis every quarter to enable effective management of global services portfolios
Each quarterly Market Vista report captures developments across three key areas 1 Market overview


2 Location trends and risks


3 Service provider developments




Outsourcing transactions trends – Transaction analysis – By function, geography, deal size and duration, etc. – Transaction analysis by industry verticals (more details in Industry Trends reports) – Listing of major IT/BPO outsourcing deals – Large offshore deals Analysis of GICs – New GIC set-ups, divestures – Plans for GIC set-ups and expansion





Key location developments – Establishment of new offshore centers, expansion of existing centers, plans of establishment and expansion of centers Risk dashboard capturing key current and emerging risks – Geo-political / economic changes – Government initiatives Quarterly focus – Fact-base on Latin American locations – Sustainability of arbitrage – Operating costs, inflation rates, and currency trends across key cities
Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

Key developments among 20 leading global service providers – Financial performance – Transaction activity – Changes in delivery footprint – M&A and alliance activity



Detailed profiles for each player capturing key developments across dimensions

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Additional Market Vista deliverables

Global Location Insights newsletter

Market Vista Primers

4-6 published every year
 

4-5 published every year
 

E-newsletter published every two months Recent topics included – Tier-2/3 cities in India for Offshore BPO delivery – Nearshore value proposition – Healthcare BPO in Philippines – Service providers’ locationrelated plans

Published every quarter Recent topics included – Global Locations Compass – Brazil – Global sourcing trends in U.S. Mortgage industry – Contact center service providers in Latin America

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Table of contents

 

Product overview Illustrative contents

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Each section of the quarterly report comprises 30+ pages of insight and data
Illustrative Table of Contents (page 1 of 2)
Topic Section I A: Trend analysis – Outsourcing, offshoring, and GICs  Outsourcing transactions analysis  Outsourcing transaction trends by time period  Offshore transactions analysis  GIC developments Section I B: Data snapshots  Major deals signed in the quarter  List of mega deals signed in the quarter  Examples of very large deals signed in the quarter  Examples of large deals signed in the quarter  Analysis of outsourcing transactions by buyer revenue  List of new GIC announcements in the quarter  List of GICs with announcements for expansion in the quarter  List of GIC divestures in the quarter Section II A: Trend analysis – Risk and opportunity dashboard and analysis  Risk and opportunity dashboard  Risk and opportunity analysis Section II B: Focus geography  Arbitrage sustainability  Operating costs  Operating cost inflation  Currency trends
Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Each section of the quarterly report comprises 30+ pages of insight and data
Illustrative Table of Contents (page 2 of 2)
Topic Section II C: Data snapshots  Market activity: Delivery centers established in the quarter  Market activity: Delivery centers planned in the quarter  Market activity: Expansion announcements in the quarter  Regional developments: Geopolitical, macroeconomic environment  Regional developments: Leading economic indicators  Regional developments: Investment environment Section III A: Trend analysis – Key developments across service providers  Service provider developments overview  Analysis of service provider developments Section III B: Data snapshots – Details of key developments and profiles by service providers  Recent M&A activity by service providers  Recent alliances and partnerships forged by service providers  Locations  Key market developments

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Section I – Market section | Overview
Captures outsourcing transactions trends, GIC developments with an emphasis on large size contracts
Market overview | Outsourcing/offshoring market index
Index of outsourcing transactions1 Number XX
XX XX

GIC set-ups | By region
Europe: XX captive set-ups  XXXX opened its shared business service center in XXXX  XXXX opened its new BPO center in XXXX
Rest of Asia: XX captive set-ups  XXXX opened its new R&D facility in XXXX  XXXX opened an R&D facility in XXXX  XXXX opened its new center in XXXX

Index of offshore captive health 1 Number 2
Captive set-ups = Captive divestures =

New +

Expansion

XX
XX XX XX XX
Middle East and Africa: XX captive set-ups  XXXX opened its first regional support center in XXXX  XX opened its new customer service center in XXXX

XX
XX XX QX-1 Year Y QX Year Y

QX Year Y-1


QX-1 Year Y

QX Year Y

XX XX QX Year Y-1

Latin America: XX captive setups  XXXX opened a new shared services center in XXXX



Transaction volumes decreased by XX% compared to the previous quarter but increased by XX% compared to the previous year Captive activity remained similar compared to previous quarters, with XX new announcements

India: XXXX captive set-ups  XXXX opened an R&D center in XXXX  XXXX opened a new R&D center in XXXX  XXXX opened a new R&D center in XXXX

Major deals in the quarter
Distribution by deal size Number of transactions Distribution by industry verticals Number of transactions Distribution by source geography Number of transactions

List of mega deals signed in the quarter
Three-quarter moving average2
Mega deals (TCV >= US$1 billion)

100% = XX XXXX XX%
XXXX

100% = XX
XXXX

100% = XX XXXX XX% XX%
XX% XXXX

Number XX
XXXX

XX% XX% XXXX

XX

XX

XX

XX

XX%

XXXX

QX Year Y-1 QX+1 Year Y-1 QX+2 Year Y-1 QX+3 Year Y-1
List of mega deals signed

QX Year Y

XX%

XXXX

XX% XXXX

XX% XX% XXXX XX% XXXX XX% XXXX




There were XX major deals (total contract value exceeding US$XX million) reported in QX 20XX, compared to XX in QX 20XX



Apart f rom the XXXX sector, the XXXX and XXXX industry verticals accounted f or around XX% of all major deals

XXXX and XXXX accounted f or ~XX% of the major deals signed in the quarter

Buyer Buyer 1 Buyer 2 Buyer 3

Industry vertical XXXX XXXX XXXX

Service provider XXXX XXXX XXXX

Deal value (US$ million) XXXX XXXX XXXX

Contrac t Functiona duration l scope Services XXXX ITO IT ADM XXXX XXXX ITO

 

XX mega deals (total contract value exceeding US$XX billion) were reported in QX, compared to XX in the previous quarter



XXXX, XXXX, and XXXX industry verticals reported mega deals

XXXX and XXXX also reported some major deals in this quarter

The following pages provide details for mega deals (TCV>US$1 billion), very large deals (TCV - US$200-999 million), and large deals (TCV US$50-199 million)

Includes 15 pages IT ADM; over IT infrastructure – datacenter, and helpdesk of data tables across BPO and BPO – HRO, procurement, real estate, and and ITOtransactions, industry-specific;GICs IT ADM; IT infrastructure – network, and helpdesk financial services

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Outsourcing transactions analysis | By deal type
Profiles the share of renewed/restructured deals compared to the previous quarter and the same quarter of the previous year
Number of transactions by type Number of transactions 100% = Renewals/ restructuring1 XX XX% XX XX% XX XX% Major outsourcing transactions reaching the end of their contract duration over the next few months Buyer Buyer 1 Buyer 2 Buyer 3 Buyer 4 Buyer 5 New transaction signings Service provider XXXX XXXX XXXX XXXX XXXX Function scope XXXX XXXX XXXX XXXX XXXX

XX%

XX%

XX%

QX Year Y-1 QX-1 Year Y

QX Year Y

1 Source:

Instances where the scope of existing contract was extended or expanded Everest Group Transaction Intelligence Database Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907 12

Section II – Locations section | Overview
Key developments and emerging risks and opportunities across locations

Locations | Market activity heatmap
XXXX
XXXX XXXX XXXX

Locations | Risk and opportunity dashboard
XXXX XXXX XXXX
XXXX

D B
XXXX

Czech Republic Hungary Morocco Mexico El Salvador Costa Rica

Poland Romania Bulgaria China India Philippines Malaysia Singapore

C C
XXXX

Egypt Panama Brazil

A
XXXX

B B

XXXX

Chile Argentina

South Africa

Locations | Focus geography
Operating cost per FTE for IT services US$’000s/per annum
XX XX XX XX XX

Locations | Market activity data
Asia

XX
XX

Country City
China XXXX
City 4 City 5 City 6 City 7

Month
XXXX

Service provider/ captive
XXXX

Number of FTEs
XXXX

Other comments
XXXX

City 1

City 2

City 3

China China
India

XXXX XXXX
XXXX XXXX

XXXX XXXX
XXXX XXXX

XXXX XXXX
XXXX XXXX

XXXX XXXX
XXXX XXXX

XXXX XXXX
XXXX XXXX

Operating cost per FTE for BPO services US$’000s/per annum XX XX XX XX

XX
XX

India
XX

India India

XXXX XXXX

XXXX XXXX

XXXX XXXX

City 1

City 2

City 3

City 4

City 5

City 6

City 7

Includes over 20 pages XXXX of data XXXX tables on market XXXX XXXX activity, costs, wage inflation, etc.

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Locations | Market activity index
Analyzes trends in activity across regions; also compares activity in tier-1 cities and tier-2/3 cities
Market activity across geographies Number of service delivery centers set up Market activity across Tier-1 and Tier-2/3 locations Number of service delivery centers set up
QX-1 Year Y QX Year Y Year Y-1 Quarterly average

XX XX XX XX XX XX XX XX XX Region 1 Region 2 Region 3 Tier-1 Tier-2/3 XX XX XX XX XX XX

 



XX delivery centers were set up during the quarter, XXXX than previous quarter Although location activity increased significantly in XXXX and XXXX, the number of delivery centers established in XXXX decreased to a XX-month low Though players set up centers in both tier-1 and tier-2/3 locations, there was XXXX activity in tier-XX locations
Everest Group (2013) Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907 14

Source:

Section II – Locations section | Illustrative output
Each quarterly report will cover a deep-dive on a specific geography/ theme

Locations | Focus geography
Projected sustainability of labor arbitrage Number of years Base scenario – Most probable operating cost inflation and currency appreciation XX XX XX Pessimistic scenario – higher operating cost inflation and currency appreciation XX XX XX

Locations | Regional developments
ITO SERVICES
Optimistic scenario – Lower operating cost inflation and currency appreciation XX XX XX


Region Asia

Key developments


Source/destination countries U.S.-XXXX U.S.-XXXX U.S.-XXXX

China – – XXXX – XXXX – XXXX India – – XXXX – XXXX – XXXX
Thailand – – XXXX – XXXX



BPO SERVICES
Base scenario – Most probable operating cost inflation and currency appreciation XX XX XX Pessimistic scenario – higher operating cost inflation and currency appreciation XX XX XX Optimistic scenario – Lower operating cost inflation and currency appreciation XX XX XX


Eastern Europe



Estonia – – XXXX Hungary – – XXXX Poland – – XXXX – XXXX

Source/destination countries U.S.-XXXX U.S.-XXXX U.S.-XXXX



Locations | Regional developments
Region Key developments


Locations | Focus geography
Annual change in real estate rentals (grade A) Percentage -X%
City 1



Asia

Sri Lanka – – XXXX – XXXX India – – XXXX – XXXX Egypt – – XXXX – XXXX – XXXX – XXXX

XXXX XXXX



-X%

City 2



Africa



City 3

X%

XXXX XXXX

City 4

X%

 

XXXX XXXX

City 5

X%




XXXX XXXX XXXX XXXX

-X%

City 6


City 7

X%



Includes a deep-dive on emerging locations covering costs, inflation, currency trends, etc.

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Section III – Service provider developments | Overview
Profiles developments across 20 leading service providers, highlighting key implications for sourcing managers
Service provider developments analysis | Transaction activity
Transaction announcementsactivity in QX Year Y and trend over QX-1 Year Y
Increased from last quarter

Service provider developments analysis | M&A and alliances
M&A by service provider category Number of acquisitions XX Alliances by service provider category Number of alliances XX

Service provider High activity Service provider 1 Service provider 2 Service provider 3 Service provider 4 Service provider 5 Service provider 6 Service provider 7 Moderate activity Service provider 8 Service provider 9 Service provider 10 Service provider 11 Service provider 12 Service provider 13 Service provider 14 Service provider 15 Service provider 16 Service provider 17 Low activity Service provider 18 Service provider 19 Service provider 20

ITO deals Number Trend

BPO deals Number Trend

Both ITO & BPO Number Trend

Similar to last quarter Decreased from last quarter

XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX

XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX

XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX


 

XXXX XXXX
XXXX

XX Offshore-centric service providers

XX Offshore-centric service providers XX XX XX



XXXX

XX

XX Traditional global service providers XX Traditional global service providers XX XX

QX-1 Year Y



QX Year Y

QX-1 Year Y

QX Year Y

XXXX XXXX

Service provider developments | Market Vista Index of service providers
Traditional global service providers
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Key market developments
Recent transaction activity Buyer name Buyer 1 Buyer 2 Buyer 3 Buyer 4 Buyer 5 Buyer 6 Buyer 7 Buyer 8 Buyer 9 Buyer 10 Buyer 11 Location footprint
Location Status Employees Description
 

Offshore-centric service providers

Announcement date XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX

TCV estimate (US$ million) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX

Duration (years) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX

XXXX

This section focuses on the key developments for the above service providers across various dimensions indicated on the next page

New center (Planned) New center (Planned)

XXXX XXXX

XXXX XXXX XXXX XXXX

XXXX

 

Includes over 40 pages of data tables on M&A, new delivery centers, management changes, etc.
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Services AO, FAO, and HRO AO AO AO AO AO AO and FAO IO AO CC and industryspecific BPO AO

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

Service provider developments analysis | Ratings summary

Limited activity

Moderate activity

High activity

Service Location provider New deals changes Traditional global service providers Service provider 1 Service provider 2

M&A and alliance activity

Overall rating

Service Location provider New deals changes Offshore-centric service providers Service provider 12 Service provider 13

M&A and alliance activity

Overall rating

Service provider 3
Service provider 4 Service provider 5 Service provider 6 Service provider 7 Service provider 8 Service provider 9 Service provider 10 Service provider 11
Source: Everest Group (2013)

Service provider 14
Service provider 15 Service provider 16 Service provider 17 Service provider 18 Service provider 19 Service provider 20

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Market Vista encompasses a suite of offerings
Multiple delivery formats allow Global Sourcing Managers to access information in a way that supports the decision-making process
Market Vista offering Description Quarterly report with in-depth coverage of transaction, location, and service provider trends Standard subscription access (annual) Premium subscription access (annual)

Quarterly Report

 

     

Primer

Quarterly brief of expert perspectives on emerging market trends (e.g., new pricing models)

Location database

Annually updated database of location stats (e.g., cost, attrition, inflation rates) for 23 major cities

 

Locations insights e-newsletter

Bi-monthly Global Location Insights e-newsletter containing detailed country and region info

Exclusive webinars

Exclusive quarterly webinars with stakeholders in the subscriber organization on key market trends and developments highlighted in Market Vista research 10 hours of analyst access per year for personalized insights and additional perspectives

Analyst consultation

Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

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Trends reports complement Market Vista quarterly reports by providing in-depth coverage of global sourcing across industry verticals and regions

Market Vista Buyer Geography Trends reports
Regions tracked  United States and Canada  Europe  Rest of the World (RoW), including Asia Pacific (APAC), Latin America (LATAM), and Middle East & Africa (MEA)

Market Vista Industry Trends reports
Industries tracked  Banking, Financial Services, & Insurance (BFSI)  Manufacturing, Distribution, and Retail (MDR)  Energy & Utilities (E&U)
    

Healthcare Technology Telecom Public Sector Travel & Hospitality

30+ pages of analysis on each industry vertical/region every quarter
Outsourcing transaction activity GIC set-up and expansion activity Service provider trends and developments

Processes and models
Decreased from last quarter Similar to last quarter Increased from last quarter

Current quarter ITO by process1 Q2 2011; Frequency of occurrence Total = 354

Previous year ITO by process1 2010; Frequency of occurrence Total = 1,381

Change in number of ITO transactions, by process1 Q2 10 to Q2 11 Q1 11 to Q2 11

Application development Application maintenance Systems integration Datacenter 90

111 348

472

87

307

60
81

263
339

Network 34 27

Desktop Helpdesk

139 138






Transaction activity was higher among IT ADM processes than IT infrastructure Adoption of ITO processes in Q2 2011 was similar to that in 2010 (yearly average) Adoption of Desktop process declined compared to the previous quarter

 

Trends in transaction volumes, contract values, and momentum Events with industry impact

 

GIC set-ups, expansions, and divestures Analysis of buyers, locations, and scope of work offshored

 

Process-level and subprocesslevel transaction trends Emerging opportunity areas

 

Service provider performance (transactions, market shares) Significant deals signed by leading enterprises
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Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

Appendix: Additional research recommendations

The following documents are recommended for additional insight into the topic covered in this report. The recommended documents either provide additional details on the topic or complementary content that may be of interest: 1. Market Vista: Q1 2013 (EGR-2013-8-R-0870); 2013. This report summarizes the key trends and developments for Q1 2013 in the global offshoring and outsourcing market

2. Industry Trends reports: Trends for Q1 2013. These reports provide industry-specific data, developments, and insights that enable global sourcing managers to navigate through the complexity, and make clear, effective decisions, contextualized and suited to their specific industry. These reports provides a deep-dive into the transaction activity, GIC developments, service provider market share, and key outsourcing transactions specific to the industry. Industries covered include: Banking, Financial Services, and Insurance (BFSI); Manufacturing, Distribution, and Retail (MDR); Energy & Utilities (E&U); Healthcare; Technology; Telecom; Public Sector; and Travel and Hospitality
3. Buyer Geography Trends reports: Trends for Q1 2013. These reports provide data, developments, and insights on outsourcing and offshoring trends for a particular buyer geography/region. These reports provide the research and analysis that enable users to navigate through complexity and make clear, effective decisions suited to their focus region. These reports provide detailed information on transaction activities, Global In-house Center (GIC) developments, service providers’ market shares, and key outsourcing transactions specific to particular regions. Regions covered include: U.S. and Canada; Europe; and Rest of the World For more information on this and other research published by Everest Group, please contact us: H Karthik, Vice President – Global Sourcing: Salil Dani, Practice Director: Anurag Srivastava, Practice Director: Everest Group Two Galleria Tower 13455 Noel Road, Suite 2100 Dallas, TX 75240
Copyright © 2013, Everest Global, Inc. EGR-2013-8-PD-0907

[email protected] [email protected] [email protected]

Phone: E-mail:

+1-214-451-3110 [email protected]
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Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research, and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies, and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations, and private equity firms in six continents across all industry categories. For more information, please visit www.everestgrp.com and research.everestgrp.com.

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